The 2017 General Election - counting down to 8 June.
Theresa May’s surprise decision to call a General Election for 8 June immediately sent ripples through stock and currency markets; Sterling rallied to a six-month high and the FTSE 100 fell back, but has since rebounded.
According to the polls, (and how much credence can we all put in those, based on previous elections?) Mrs May started the campaign more popular than any other leader since Mrs Thatcher back in the 1970s. Markets have so far responded well to her oft-repeated message that she stands for “strong and stable government”.
Legislation on hold
Much has happened in a comparatively short time. Controversial changes to pensions and investment income have been delayed ahead of the election and pulled from the Finance Bill, which was reduced from 762 pages to around 140, according to the Chartered Institute of Taxation (CIOT). The Money Purchase Annual Allowance for those who have already made a withdrawal from their defined contribution personal pension, but wanted to continue to contribute, was scheduled to reduce from £10,000 to £4,000, but this has now been delayed. Also missing from the Finance Bill, is the plan to reduce the tax-free dividend allowance from £5,000 to £2,000 from April 2018. The scheduled dramatic rise in probate fees that would have seen estates worth more than £2m paying £20,000 has also been shelved for the time being.
The state pension
There has also been a lot of speculation surrounding the future of the “triple lock” which guarantees a minimum increase in the state pension each year by whichever is the greatest of inflation, average earnings, or 2.5%. This is proving to be a heavy financial burden for any government to commit to long term; so far Mrs May has refused to guarantee its future. Commentators are suggesting that it might be replaced with a “double lock”, removing the minimum annual 2.5% rise, with the money saved being pledged to fund social care.
Meanwhile, Jeremy Corbyn has said that a future Labour government will guarantee the state pension triple lock and will not in his words “move the goal posts for people looking forward to retirement”, in a reference to the increase in the age at which some women are able to claim their state pension. Labour, he said, would extend pension credit to those worse hit by the change to state pension age, potentially giving around half a million women £155 per week.
Volatility in times of uncertainty
Uncertainty is generally bad for stock markets, and they can prove jittery in the run up to an election; stocks and share prices can often rise and fall with greater frequency in the short term. Now, more than ever, it’s important not to let politics get in the way of a well-balanced and diversified portfolio. Calling the result of any election, or predicting likely outcomes is almost impossible to do, meaning that investors should stay focused on their long-term investment goals and not pay too much attention to short-term political events.
For financial planning advice in the aftermath of the UK general election please contact Adam Tebbutt at Argents Wealth Management on 01603 666132.